Some investors seek out stocks with strong growth prospects, while others prefer those that offer reliable income. In reality, certain stocks manage to deliver both benefits.
Take the energy company MPLX ( MPLX 0.35%) as an example. Although MPLX may not be as widely recognized as some major energy firms, its performance over the last five years has been remarkable. During this period, the company’s shares have surged nearly 186%, compared to a 95% increase in the S&P 500 as of September 9.
Although no one can say with certainty that MPLX will keep up this growth rate, one thing is clear: its exceptionally high dividend makes it highly appealing for those who prioritize income-generating investments.
Image source: Getty Images.
How MPLX operates
The energy sector can be broken down into three segments: upstream, midstream, and downstream. Upstream companies are involved in finding and extracting oil and natural gas; midstream firms handle transportation and processing; while downstream businesses focus on refining, marketing, and selling products like the gasoline used in vehicles.
While some large energy companies span multiple segments, MPLX is focused exclusively on midstream activities. Established by Marathon Petroleum, it manages pipelines, processing facilities, storage sites, and other assets that transport and prepare oil, natural gas, and natural gas liquids (NGLs).
MPLX reports that it is responsible for handling over 10% of the nation’s natural gas output.
MPLX’s structure benefits shareholders
Unlike standard corporations, MPLX functions as a master limited partnership (MLP). This means its earnings and losses are passed directly to investors, bypassing corporate-level taxes and enabling higher distributions to shareholders.
Currently, MPLX offers a 7.6% dividend yield, which is lower than its five-year average of 9%, but it remains more than six times higher than the S&P 500’s typical yield.
MPLX Dividend Yield data by YCharts
MPLX’s dividends may fluctuate more than those of typical corporations, as they are tied to distributable cash flow (DCF). Even so, since 2021 its DCF has grown at a compound annual growth rate (CAGR) of 6.9%.
MPLX’s recent financial performance has been solid
The company earns revenue by charging for the transportation, storage, and processing of oil, natural gas, and NGLs. These services are usually secured through long-term agreements, providing MPLX with predictable and steady cash flows.
In the second quarter, MPLX posted $3 billion in revenue, representing a 1.6% decline from the previous year. However, its adjusted EBITDA—which measures profitability from core operations—reached $1.7 billion, an increase of 5% year over year.
While MPLX may not regularly deliver double-digit revenue growth, what investors focus on most is its DCF, as this figure drives dividend payments—a key reason many choose to invest in the company.
During the second quarter, MPLX’s DCF increased by only 1% year over year, reaching $1.42 billion. Nonetheless, the company was able to distribute $0.9565 per share, up from $0.8500 per share for the same period last year.
Is MPLX a good fit for your portfolio?
Extremely high dividend yields are attractive for income-focused investors, especially at levels seen with MPLX. However, it’s wise not to rely on yield alone, as high dividends can sometimes be misleading. Fortunately, MPLX doesn’t appear to fall into that trap.
The company probably won’t achieve the rapid growth seen in the tech sector, but it does have meaningful expansion prospects. One of its main strategies for growth is acquiring systems and assets that broaden its operations.
For instance, its recent acquisition of Northwind Midstream for $2.375 billion is expected to triple its treatment capacity by the latter half of 2026 and generate returns in the mid-teen percentage range, which is quite notable.
If you’re comfortable managing the extra tax considerations that come with MLPs and their distributions—such as the need to file a Schedule K-1—then MPLX could be a valuable income-oriented holding for your portfolio.
